A theory of household consumption that assumes households make consumption decisions based on their expectations of lifetime income is known as the

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The permanent income theory of consumption, proposed by Milton Friedman, posits that people's consumption choices are based on their expectations of lifetime income, rather than just their current income. This theory suggests that individuals aim to smooth out their consumption over their lifetime, adjusting their current spending to reflect their long-term income expectations.

A Theory of Household Consumption That Assumes Households Make Consumption